Under
the innocent-sounding rubric of "public policy" lurks a judicially-created
monster capable of totally destroying freedom of contract in the employment
setting. The following proposition sounds innocuous enough: An employer should
be free to hire and fire individuals for any reason, but should not be permitted
to so act when it violates basic public policy. This proposition seems quite
sensible and just. After all, whyshould employers be able to commit anti-public acts at the expense of
employees and get away with it? But careful consideration of this simple-looking
proposition immediately compels one to ask, what is "public policy"?

The extension or
limitation of the definition of what constitutes "public policy" is absolutely
critical. A person could be discharged for many things: 1) for failure to
violate a criminal statute, 2) for exercising a statutory obligation, 3) for
exercising a statutory or constitutional right, or 4) for doing something the
general public considers laudatory or not worthy of discharge. As one moves
along this progression of potential improper reasons for discharge, the ability
to detect the underlying rule beneath the exception becomes increasingly
difficult.

The
easiest category to accept as a "public policy" exception to employment-at-will
involves employer demands that employees violate the law. The leading case
denying an employer's right to discharge an employee for refusing to violate a
criminal statute is Petermann v. Teamsters Local 396, a 1959
California decision. In that case, the employee, subpoenaed to testify at a
legislative hearing, was instructed to commit perjury at the hearing. When the
employee testified truthfully, he was discharged. The California court held that
a discharge aimed at coercing an act specifically enjoined by statute gave rise
to a cause of action, even though the perjury laws themselves provided no remedy
to the employee:

It
would be obnoxious to the interests of the state and contrary to public policy
and sound morality to allow an employer to discharge any employee . . . on the
ground that the employee declined to commit perjury, an act specifically
enjoined by statute... (I)n order to more fully effectuate the state's declared
policy against perjury, the civil law, too, must deny the employer his generally
unlimited right to discharge an employee whose employment is for an unspecified
duration, when the reason for the dismissal is the employee's refusal to commit
perjury. [14]

Petermann, like
the statutory prohibitions against discrimination, presents a compelling case
for the creation of an exception to the employment-at-will rule. Other
illustrative cases supporting the principle that the discharge of an employee
for refusing to commit a crime is improper include Trombetta v.
Detroit Toledo and Ironton Railroad Co.,
[15] where an employee alleged
discharge for refusing to illegally manipulate pollution sampling results;
Tameny v. Atlantic Richfield Co.,
[16] where the discharge allegedly
was for refusing to participate in a price-fixing scheme; Ostrofe v.
H.S. Crocker Co.,
[17] involving a refusal to participate in a conspiracy to
violate the Clayton Act; and Sheets v. Teddy's Frosted Foods, Inc.,
[18]
where the employee alleged dismissal for informing his employer that certain
packaged goods were mislabeled (silence constituting a violation of
Connecticut's Uniform Food, Drug and Cosmetic Act).

This
first category of "public policy" is the simplest, most limited, and explicitly
recognizable exception. It has clearly defined bounds. Simply put, an employee
cannot be compelled, at the cost of his/her job, to violate statutory law. To a
great extent, application of this exception is designed not so much to protect
the employee, as to protect the public at large. Application of the exception
helps to discourage attempts to violate the law.

Much
the same can be said for the second category of "public policy" exception, where
the discharge is not for refusal to violate a law, but for following a legal
obligation. The exception still remains fairly limited, since the reference
point remains statutory. The classic example is posed by Nees v. Hocks,
an Oregon case where the employee was discharged for indicating her availability
for jury duty over her employer's objections. The Oregon Supreme Court reasoned
that "(i)f an employer were permitted with impunity to discharge an employee for
fulfilling her obligation of jury duty, the jury system would be adversely
affected. The will of the community would be thwarted."
[19] Here too, the good
of the public as a whole is protected as much, if not more, than the employee
herself.

The
public obligation concept is susceptible to being stretched beyond clearly
defined statutory bounds. Palmateer v. International Harvester Co.
[20]
prohibited a retaliatory discharge for supplying police with information of
illegal conduct by a fellow employee. Sherman v. St. Barnabas Hospital
[21]
prohibited a retaliatory discharge for resisting an illegal preferential hiring
scheme under pressure of a strike threat by a participating union. Yet even in
these cases, the exception remain fairly narrow. The individual is doing good
social deeds closely connected with existing statutes which prohibit wrongful
behavior.

However, with the third "public policy" exception – the exercise of a statutory
or constitutional right – the narrow confines of proscriptive and/or
prescriptive statutory law are abandoned and the exception begins to swallow the
rule. Prohibiting discharge for the exercise of a statutory or constitutional
right can theoretically encompass the whole universe of social activity. Almost
any activity can be linked to the exercise of such a right. It becomes almost
impossible to draw a line between what is and is not "public policy".

The
most common case example involves the filing of a workers' compensation claim.
In Frampton v. Central Indiana Gas Co., the Indiana Supreme Court
relied on a general Indiana provision declaring that no agreement or "other
device" shall operate to relieve an employer of its obligation under the
workers' compensation system. The court referred to the humane purposes of
workers' compensation and stated:

The Act creates a duty in the employer to compensate employees for
work-related injuries ... and a right in the employee to receive such
compensation. But in order for the goals of the Act to be realized and for
public policy to be effectuated, the employee must be able to exercise his right
in an unfettered fashion without being subject to reprisal. If employers are
permitted to penalize employees for filing workmen's compensation claims, a most
important public policy will be undermined. The fear of being discharged would
have a deleterious effect on the exercise of a statutory right.
[22]

Several responses to this court rationale come immediately to mind. First, the
employee may have a right to workers' compensation, but is not legally obligated
to apply. There is no compelling of a wrongful act. Second, the employee remains
fully entitled to recover for workers' compensation. That right is not being
interfered with. Third, if the legislature had wanted to prohibit terminations
based on the application for workers' compensation, it could have done so within
the workers' compensation statute. The legislature chose not to. Is it proper
for the court to intervene where the legislature chose not to prohibit an act?
All of these questions support the basic concern that prohibiting discharge for
exercising a "right" is already too open-ended.

It is
important to separate individual facts from the broader legal impact of adopting
such an open-ended doctrine. Most of us would agree that a good employer should
not firs a worker for seeking workers' compensation, or exercising other basic
"rights". But if we are unwilling to ratify our preferences through the
democratic process by establishing firm statutory language, why should we grant
unfettered discretion to individual judges and jurors?

What
activity can a clever lawyer not attach to some statutory or constitutional
right? The Constitution provides protection for free speech, so does that mean
an employee cannot be discharged for anything he or she says, no matter how
derogatory of the employer or destructive of the work environment? Statutes
regulating the sale of alcohol give adults the "right" to purchase alcoholic
beverages. Does that mean an employee has a right to drink alcohol on the job?
Similar examples could go on forever, as we list "right" after "right" after
"right". Where does a court draw the line? It is at this point that the
exception has become the rule, since the judiciary is free to recognize
any exercise ofany "right" as protected. The whim ofa judiciary on a social responsibility mission
becomes an intangible threat with every employee termination. The majority of
courts have not taken this third step just yet. Many draw the line where
administrative remedies are available. Others limit recourse to this type of
"public policy" claim to situations where the employee is acting as an employee,
as opposed to some other capacity, such as shareholder, environmental activist,
or political volunteer. Many have simply rejected any recourse to the
exercise-of-a-right exception. But will this current reticence on the part of
many of the nation's courts continue?

The
danger to individual freedom from an activist judiciary is carried to its
extreme with the fourth category, where employees are permitted to challenge
their discharge for acts the general public (or more specifically, the courts)
find too laudatory or not worthy of discharge. The classic example every
contemporary law student is introduced to is Monge v. Beebe Rubber Co.,
a New Hampshire case where the discharged employee alleged that she had been
promoted to a higher paying position after her foreman told her that she could
have the job if she was "nice" to him and that she was subsequently fired for
refusing to date him. The New Hampshire Supreme Court found a cause of action in
her claim, holding that "a termination by the employer of a contract of
employment-at-will which is motivated by bad faith or malice or based on
retaliation is not in the best interest of the economic system or the public
good and constitutes a breach of the employment contract." At no point in its
decision did the court articulate any constitutional or legislative basis for
its holding or what should be in the public's best interest.
[23]

This
decision was followed by Fortune v. National Cash Register Co.,
[24]
a Massachusetts case where a salesman with twenty-five years of service was
discharged on the day after the employer received a $5 million order which could
have resulted in a $92,000 bonus to the salesman. The employer had no legal
obligation to pay anything to the salesman, and the court acknowledged that the
salesman had received all commissions due under his contract. Nevertheless, the
court found that the salesman had been terminated in order to avoid payment of
the bonus, something the court just didn't like. So the court decided to forget
about contract and just let its feelings govern the day. It deemed it
appropriate to find a bad faith breach of the employment-at-will contract.

Both
of these cases vividly present one of the toughest dilemmas posed by the common
law, since the facts in both are so sympathetic to the plaintiff. Most of us
would agree that what the employers did in these two cases was wrong. Most of us
instinctively would like to do something to help the wronged individuals. Yet to
invent legal theories to help them out, just because the facts in their
particular cases are emotionally compelling, can have enormous long-term
consequences which go tar beyond the sympathetic immediate facts at hand.

These
decision are disturbing, not because of the immediate facts, but because of the
uncontrollable theories they establish to cope with the immediate facts. These
cases constitute the threshold to a complete judicial takeover of the employment
relationship. There is no limitation of any kind on judicial Intervention, no
reference to statute, no articulation of boundaries which might guide employer
behavior. Instead, the court simply says, if we don't like a reason for
termination, we'll hold you as the employer liable. Every employment contract
becomes subject to ever-changing judge or jury standards of "fairness" and "good
faith". A "covenant of good faith and fair dealing" is imagined in order to
justify the desirable result. "Public policy" becomes nothing but a charade to
cover up the exercise of unrestrained judicial will. The practical effect is to
destroy employment-at-will and replace it with a "just cause" standard, since
the absence of "just cause" can in almost every case be interpreted as bad
faith.

By
the time one has reached the fourth "public policy" exception, one also has to
doubt whether the public interest is still the controlling factor. Whereas
protection of the public is clearly identifiable in the first exception, where
employers are prohibited from discharging employees for refusing to violate a
statutory prohibition, it would appear that the primary goal of the fourth
exception is merely to protect the economic interest of particular individual
employees. Broad public good is replaced with the isolated imposition of
fairness in particular cases. It consists of judges and jurors imposing personal
morality after the fact, without reliable established legal foundation.